What does the economic downturn mean for career transitioners targeting Customer Success?
Photo Credit: Arrul Lin Syhuhse Unsplash
Is the recent news of layoffs leaving you scratching your head about your choice to join the tech industry? This isn’t the time for panic. For those who are new to the tech industry it can be pretty scary to hear news like this:
“The tech sector's tumultuous year has been denoted by daily announcements of layoffs, hiring freezes and rescinded job offers. The numbers are stark, according to the tech layoff tracking site Layoffs.fyi. About 17,000 workers from more than 70 tech startups globally were laid off in May, a 350% jump from April. This is the most significant number of lost jobs in the sector since May 2020, at the height of the pandemic.”
However, with context it is less scary than it appears on the surface.
Most tech companies that are early/mid stage and venture backed are not trying to be profitable. Their goal is to demonstrate rapid growth and market saturation as quickly as possible, with the understanding that profitability will only come with significant volume in later years. To support this growth, they take venture investment every 18 to 24 months as they meet milestone goals. So they plan to run through let’s say $25M of the $50M they just raised in 12 months to hit a rapid growth milestone goal, so they can start raising in order to close $150M in additional funding 6 months later (before they run out of cash).
When the economy is poor there is a risk that capital markets might start being more conservative with investments, for example raising the standards for milestone goals. The new goal might take that company 18 months to hit instead of 12. If they continue to spend at the same rate and don’t close a round of funding within the 18-24 month window the last investment funded, they will run out of cash. So startups react quickly. CEOs/boards recalculate how quickly they are spending and what they are spending money on.
Here’s the thing though, they still have to hit their goals, they just have to be more prudent about how they go about it. So they shift spending. In my 12+ years in tech, this is what I’ve seen:
The first thing to go is often the recruiting function. As a hiring manager it is really nice to have someone who can coordinate interviews, check references, and hand deliver you a pre-screened stack of candidates. However, when push comes to shove, hiring managers can get it done too, it just takes longer. This has a natural gating factor at how quickly payroll costs can climb. Plus they save money on the HR budget which is not considered revenue generating.
Travel budgets, gone. Especially in this remote-friendly work environment, business has proven that work can get done without climbing on a plane. There will be downstream impacts of this with the travel and hospitality industries that will be evident over the next few months. Tech companies that support those clients will be hit harder.
Marketing and sales, while revenue generating, are not as efficient as Customer Success. Business to business sales cycles can be 12 months+ which means a lot of spending for revenue that might come too late. BDRs/SDRs who do outbound cold calling/ emails to set up appointments for sales are often the first to go, and sales people will be expected to take a more active role in finding their own meetings. Marketing roles that have a less directly quantifiable impact directly on revenue (eg branding, social) are also at risk of layoff. Sales people who are making their numbers are typically safe, but missing quota for even a quarter could put them at risk.
Studies show that it costs a company 5x less to sell to an existing customer than to acquire a new one. It can also be much faster. So many tech companies not only protect CSMs from layoffs, but may actually grow those teams even in the face of workforce reductions. Cutting CSMs and thereby churning existing customers will put them further from milestone goals, so these teams are typically the least likely to be impacted.
Engineering talent is expensive and hard to find. So companies may use this as an excuse to offload a few costly under-performers. But rarely do they cut any significant amount of technical talent. Priorities may shift though, from long-term strategic development that customers are asking for, to short-term revenue generating projects. This will mean CSMs with diplomatic skills are in high demand.
It’s still a great time to join the tech industry.
What does this mean for you, the aspiring CSM career transitioner?
>There may be more jobs that are filled through personal networks where jobs aren’t posted, because hiring managers are steering the job seeker ship. So use your network or partner with someone with RecastSuccess!
>Hiring may take a bit longer because talent acquisition teams are short staffed, so be patient and demonstrate great follow through.
>These market fluctuations are inevitable, and have happened many times before. They will happen again in the future. For all the companies in the news for layoffs there are even more announcing recent funding raises, and new companies being founded- all of which means more jobs opening up too! Those companies that slowed their spending to weather the slower pace of investment will be hiring again soon too.
>When considering a new job ask if they have at least 12 months of runway (how many months of operating capital do they have in the bank)? When do they plan to raise again (fundraising can take 6-12 months and isn’t guaranteed)? Don’t join a company running on fumes because no one knows when the recession will end. CSMs are last to go, but if the company folds… Thankfully there are lots of other tech companies still hiring CSMs.
>Stay the course. Job seeking is stressful enough, don’t let the economy add to your anxiety. You’ve got this.
Good luck in your job search!
